Organizational Applications and Solutions SCM and ERP

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1 Dr Sherif Kamel Department f Management Schl f Business, Ecnmics and Cmmunicatin Organizatinal Applicatins and Slutins SCM and ERP

2 Outline Supply chain and value chain definitins Cmpnents, benefits and prblems f a supply chain Surces and slutins f SCM prblems Cmputerizatin and SCM Enterprise resurce planning ERP functins and implementatin Managerial issues Case: Hw did Dell re-engineer its SC Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

3 Supply chain and value chain definitins Supply chain Flw f materials, infrmatin, payments, and services frm raw material suppliers, thrugh factries and warehuses, t end custmers Demand chain Prcess f taking rders Supply chain management (SCM) T plan, rganize, and crdinate all the supply chain s activities Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

4 Benefits f supply chain Reduces uncertainty and risks in the supply chain which psitively affects inventry levels, cycle time, business prcesses and custmer service and cntributes t verall increase in prfitability and cmpetitive advantage Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

5 Cmpnents f a supply chain Upstream Supply Chain Organizatin s first tier suppliers and their suppliers Internal Supply Chain Prcesses used by an rganizatin t transfrm their inputs t utputs Dwnstream Supply Chain Prcesses invlved in delivering the prduct t the final custmers Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

6 Supply chain Invlves the life f a prduct frm Invlves mvement f tangible and intangible inputs Can cme in all shapes and sizes and may be fairly cmplex Can be bi-directinal and invlve the return f prducts (reverse lgistics) The flw f gds, services, infrmatin and financial resurces must be fllwed with an increase in value Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

7 Supply chain prblems Prblems with the supply chain culd cause cmpanies t g ut f business In WWII, Germany encuntered prblems supplying trps in Russia, which cntributed t their cllapse In 1999, TysRus had prblems supplying t hliday shppers and lst business Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

8 Surces f SCM prblems UNCERTAINTY In demand frecast In delivery times and prductin delays POOR COORDINATION With internal units and business partners Ineffective custmer service High inventry csts, lss f revenue and extra cst fr expediting services Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

9 Bull-whip effect Mst persistent SCM prblem Cntinuus shifts in rders up and dwn the supply chain Distributr rders fluctuate because f pr demand frecast, price fluctuatin, and rder batching Avidable with prper inter-rganizatinal Intranet - Use f EDI, extranets and grupware technlgy Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

10 Slutins t supply chain prblems Vertical Integratin Purchasing and managing the supply surce Building Inventries Insurance against supply chain shrtages Difficulty t crrectly determine inventry level fr each prduct and part a cstly prcess Other slutins include During peak times, utsurce rather than d-it-yurself Cnfigure ptimal shipping plans Create strategic partnerships with suppliers Use the just-in-time apprach t purchasing Manufacture nly after rders are in Achieve accurate demand by wrking clsely with suppliers Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

11 Case: Hw Littlewds imprved its SCM Prblem Littlewds Large British clthing retailer with 136 stres in the UK and Ireland Slutin Overstcking prblems in the supply chain management Intrduced web-based perfrmance reprting system Enabled merchandising persnnel t make mre accurate stck, sales and supplier decisins Outcme In 1997, Littlewds saved 1.2 millin US dllars as a direct result Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

12 Cmputerized systems and SCM Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

13 Systems integratin Tangible Benefits Inventry reductin Persnnel reductin Prductivity imprvement Order management imprvement Financial-clse cycle imprvements IT cst reductin Intangible Benefits Infrmatin visibility New/imprved prcesses Custmer respnsiveness Standardizatin Flexibility Glbalizatin and business perfrmance Prcurement cst reductin Revenue/prfit increases, etc. Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

14 Value chain integratin The prcess by which multiple enterprises within a shared market channel cllabratively plan, implement, and manage (electrnically as well as physically) the flw f gds, services, and infrmatin alng the entire chain in a manner that increases custmer-perceived value addedvalue realized Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

15 Integrating bth chains supply and value A supply chain transfrms int an integrated value chain when it Extends the chain all the way frm sub-suppliers t custmers Integrates the back-ffice peratins with thse f the frnt ffice Becmes highly custmer-centric, fcusing n demand generatin and custmer service Is practively designed by chain members t cmpete as an extended enterprise Seeks t ptimize the value added by infrmatin and utilityenhancing services Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

16 Value chain integratin Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

17 Enterprise resurce planning (ERP) ERP is the prcess f planning and managing all resurces and their use in the entire enterprise Leading ERP sftware prducers include - SAP, Oracle, JD Edwards, Cmputer Assciates, PepleSft ERP is there t integrate all departments and functins acrss a cmpany nt a single cmputer system Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

18 ERP functins Prvides a single interface fr managing rutine manufacturing activities Facilitates custmer interactin and manages relatinships with suppliers and vendrs Frces discipline and rganizatin arund business Supprts administrative activities Starting 1990s 2 nd generatin ERP penetrated the marketplace Emergence f SCM systems that cmplement ERP systems Prvide intelligent decisin supprt capabilities Overlay existing system and pull data frm every step f the supply chain Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

19 ERP implementatin Identify custmer s expectatins Determine ERP prduct capabilities, and gaps Level f change the custmer has t g thrugh t make the system fit Level f cmmitment within the custmer rganizatin t see the prject thrugh Custmer s rganizatin and culture Risks presented by plitics within the custmer rganizatin Cnsultant s capabilities, respnsibilities and rle (if applicable) Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

20 ecmmerce and SCM Replaces all paper dcuments with electrnic dcuments Replaces faxes, phne and telegrams with electrnic messaging system Enhances cllabratin and infrmatin sharing Results in shrter supply chain and minimum inventries Facilitates custmer service Intrduces efficiencies in buying and selling thrugh the creatin f emarketplaces Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

21 Managerial issues Ethical issues Cnducting a supply chain management prject may result in the need t lay ff, retrain, r transfer emplyees Sharing f persnal infrmatin and cmputer prgrams Hw much t integrate? While cmpanies shuld cnsider extreme integratin prjects, including ERP, SCM, and electrnic cmmerce, they shuld recgnize that integrating smetimes results in failure Rle f IT Almst all majr SCM prjects use IT hwever it is imprtant t remember that technlgy plays a supprtive rle t rganizatinal and managerial issues Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

22 Case: Hw did Dell re-engineer its SC Prblem Dell pineered the mail rder apprach t selling PCs In 1993, Cmpaq cuts prices t drive Dell ut f the market and Dell experiences $65 millin in lsses Slutin Results Dell implements the fllwing re-engineering strategies - Mass custmizatin - Just-in-time marketing - Electrnic rders and shipments - ecllabratin with majr buyers In 2001, Dell made ver $4 millin in cmputer web sales/ day Becmes leader in Custmer Relatinship Management (CRM) Online tracking f rders and shipments Viewer apprved cnfiguratins and pricing Custmized hme pages fr clients Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

23 Lessns frm dell.cm By intrducing a new business mdel, ne can change the manner in which business is dne T implement this mdel n a large scale, ne needs t build superb supply chain management Dell made an imprved lgistics system alng the entire supply chain Imprved cmmunicatins and custmer service, which are part f Dell s CRM prgram, are the crnerstnes f its success Cpyright 2002 Turban, McLean and Wetherbe Cpyright 2005 Sherif Kamel

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